What is a home inspection contingency?

What is a home inspection contingency?

The short answer is that a home inspection contingency is a contingency in your offer that indicates your offer is contingent upon a satisfactory home inspection.

Typically, the home inspection contingency clause in an offer looks something like this:

Generally speaking, in the Cambridge and Somerville, MA market that I work in, a Buyer is given something like five business days after offer acceptance to have the property inspected by a duly-licensed person engaged in the business of conducting home inspections, and then must indicate no later than the day following the last date the property can be inspected if they are exiting the transaction based on the home inspection.

Note that the inspection contingency clause included here asks the Buyer to indicate the dollar amount of serious structural, mechanical or other defects that may occasion the Buyer to exit the transaction. Some buyers insert $0 or $1 in this blank. Others put $1,000. In a competitive bidding situation, some buyers may choose to put a figure like $5,000 - or an even higher number.

The market has been very hot in Cambridge and Somerville, and very often multiple offers is the norm. As a result, some Buyers will remove the home inspection contingency from their offer, seeking thereby to make their offer more attractive to the Seller.

Some Buyers will remove the inspection contingency from their offer and simply not have a home inspection. Please note that if you remove the home inspection contingency from your offer, you should not expect the Seller to grant access to the property for a home inspection after offer acceptance.

Some Buyers will have a home inspection before offers are due. I recently had a listing where four prospective buyers had pre-offer home inspections.

Some Buyers will have a pre-offer consultation with a home inspector before offers are due.

As a Buyer, you need to decide what you are comfortable with regarding the home inspection contingency clause. I never recommend that a Buyer remove the home inspection contingency clause from their offer. That being said, everyone understands that in a multiple offer situation, having a home inspection contingency clause in one's offer can make it more challenging to be the winning bid.

When you make an offer in Massachusetts, you are required to receive the Home Inspector Consumer Fact Sheet. Be sure to review this document. Your Buyer's Agent ought to be giving you a copy of it when you are making an offer.

It's important to note that by definition the home inspection contingency clause affords the Buyer the right to exit the transaction. The home inspection contingency clause does not by definition afford the Buyer the right to renegotiate the purchase price based on findings. For sure, if the inspection uncovers a serious issue previously unknown, the Seller may be open to negotiation. However, it is important for a Buyer to remember that the Seller is not obligated to enter into negotiations after the home inspection. It's especially true in a hot Seller's market that most Sellers are resistant to renegotiating after the home inspection based on findings.